Digital Equipment Corp Vs Alta Vista Technology
United States District Court for the District of Massachusetts
Decided March 12, 1997
MEMORANDUM AND ORDER
I. Introduction
This case involves a dispute between two corporations over rights and commercial interests on the Internet. (1) Both parties operate electronic services and distribute software over the Internet. The plaintiff, Digital Equipment Corporation (“Digital”), has brought suit against defendant AltaVista Technology, Incorporated (“ATI”), for breach of a trademark licensing agreement, trademark and servicemark infringement, unfair competition, and trademark dilution.
Digital owns an Internet and World Wide Web “search-engine” service known as AltaVista. (2) Digital purchased ATI’s rights in its trademark “AltaVista”; Digital then licensed back to ATI the right to use “AltaVista,” in certain defined ways, as part of both ATI’s corporate name and its Uniform Resource Locator (“url”), “http://www.altavista.com.” (3) The license precludes ATI from using AltaVista as “the name of a product or service offering.”
Digital seeks a preliminary injunction, claiming that ATI’s Web-site breaches its licensing agreement and infringes its trademark rights in “AltaVista.” ATI opposes Digital’s motion on the merits and moves to dismiss for lack of personal jurisdiction.
First, I find that this Court has jurisdiction over ATI, whose Web-site, in the context of the specific facts of this case, meets both the statutory and constitutional standards. Second, I find that Digital has met the requisite standards for a preliminary injunction.
ATI is hereby ENJOINED from using the trademark AltaVista in any way that does not comport with the specific terms of the licensing agreement, as set forth in the opinion below and the accompanying Order.
II. Background
In December, 1995, Digital, a Massachusetts corporation, launched an Internet search service using the servicemark “AltaVista.” Since that time, Digital’s AltaVista Internet search service has become one of the leading search services on the Internet and, indeed, one of the most frequently visited sites on the World Wide Web (“Web”). Currently, Digital’s AltaVista Web-site receives millions of “hits” (or visits) per day. Digital also markets and sells computer software products and services related to the Internet under names such as AltaVista Directory, AltaVista Firewall, AltaVista Forum, AltaVista Mail, etc. Its marketing strategy, however, did not then include soliciting advertising revenues from advertisers on its Website.
At the same time, Digital claims two sources for its right to use the service and trademark “AltaVista”: its own use of the mark under common law, and its acquisition by assignment of ATI’s trademark rights in AltaVista.
ATI is a California corporation, formerly known as Tree Full of Owls, Inc.; it changed its name to AltaVista Technology, Inc., by amendment to its Articles of Incorporation, in May of 1994. In March of 1996, Digital paid for an assignment of ATI’s rights to the trademark AltaVista; it immediately licensed-back to ATI the right to use AltaVista both as part of ATI’s corporate name, AltaVista Technology, Inc., and as part of ATI’s Web-site address “www.altavista.com.” The license agreement, however, precludes ATI from using “AltaVista” as “the name of a product or service offering.”
The scope and meaning of this license are hotly contested by the parties. ATI contends that its agreement with Digital was formed with the specific intention of allowing it to benefit from the popularity of Digital’s AltaVista, and the strong brand identity the “AltaVista” search service had created. In contrast, Digital maintains that ATI’s licensing agreement strictly limited ATI’s ability to use “Altavista” — as part of its corporate name and its url — and not as “the name of a product or service offering.”
Consistent with its broad interpretation of the agreement, ATI dramatically changed the appearance of its Website, (4) moving it markedly closer to the appearance of Digital’s AltaVista Web-site. (5) By the time this lawsuit was brought by Digital, ATI’s Website looked like, and could effectively function as, Digital’s AltaVista search service.
As of May 22, 1996, less than two months after the Digital-ATI agreement, a visitor to “www.altavista.com,” ATI’s Web-site, would see the word “AltaVista” by itself at the top of the page, apparently not attached to ATI’s corporate name. One would see an offer of free ATI software. Using a link, (6) one could “click” (7) to receive “demo versions of AltaVista software.” (8) One would also have been offered a link to an unnamed “Search Engine” where one could “Search the Internet. . .” This link was to Digital’s AltaVista search service.
By August 8, 1996, ATI’s page changed again. Again, the visitor would see the word “AltaVista” at the top of the page, again not as part of ATI’s corporate name. Below that there was a banner ad (9) selling an unrelated party’s products. This time, however, directly beneath the “Search Engine” line were the words “Digital’s Alta Vista,” rather than merely “Search the Internet. . .”
On the same date as these changes were implemented, Digital’s trademark counsel, Lawrence Robins (“Robins”) sent ATI’s president, Jack Marshall, a letter claiming that the appearance of ATI’s Web-site constituted a breach of Clause 1.1 of their license agreement. The letter states: Use of the ‘AltaVista’ logo, without the additional language ‘Technologies, Inc.’ is a violation of Paragraph 1.1 of the Agreement. The sole license granted therein is to use “AltaVista” as part of the corporate name ‘AltaVista Technologies, Inc.’ and as part of the url ‘http://www.altavista.com.’ Robins claimed that any use by ATI of “Altavista,” including using it as the name of a product or service on ATI’s Web-site, and apart from its use as part of ATI’s corporate name and as the url of ATI’s Web-site, constituted a breach of Clause 1.1.
Clause 1.1 of the license agreement says: Digital hereby grants to ATI a nonexclusive, nontransferable license to use the trademark ‘ALTAVISTA’ (the “Mark”) as part of the corporate name ‘Altavista Technologies, Inc.’ and as part of the url ‘http://www.altavista.com, and in accordance with and subject to the terms and conditions of this Agreement, provided that nothing in this agreement shall prohibit Digital or any of its direct or indirect majority-owned subsidiaries from using the Mark or from offering products or services under such Mark to third parties. This License does not grant ATI the right to use the Mark as the name of a product or service offering.
At the same time, Robins put ATI on notice of the possible termination of their license agreement pursuant to Clause 3.1. Clause 3.1 of the licensing agreement deals with quality control: “all products sold and services rendered while using the Mark shall be. . .of such style, appearance and quality as to protect and enhance the Mark and the goodwill associated therewith.” (10)
A month later, on September 5, 1996, a visitor to ATI’s Website would have been greeted by “AltaVista” in large, bold letters at the top of the page, with “Technology” immediately under it in smaller, plain type; beneath this was a banner ad and link through which one could “Search the Net with AltaVista” (again, presumably, but not explicitly, Digital’s search service) by “Clicking here.” (11) In addition, the site retained a second, clearly designated link to Digital’s AltaVista search site, as well as ATI’s AltaVista logo by itself in bold near the bottom of the page.
By October 28, 1996, three days before Digital brought its present motion for preliminary injunction, ATI’s Web-site had been altered again: beneath the AltaVista logo in big, bold letters (with a small, plain “Technology” placed immediately below it) sat a “banner ad” for an unrelated product; beneath the banner ad is a solicitation encouraging one to “Click here for advertising information-reach millions every month!” Immediately below that sits an almost identical graphical representation of Digital’s AltaVista search engine interface (i.e. the appearance of Digital’s AltaVista Web-site, including the logo, etc.). Below that is a statement informing users that they can “Search with Digital’s AltaVista” (using Digital’s AltaVista search engine while still, to all appearances, being at the ATI Web-site). In short, a visitor to ATI’s site could easily have the impression that they were actually at Digital’s AltaVista site. (12)
By October 28, 1996, ATI’s Web-site was designed to look, feel, and function very much like Digital’s AltaVista Web-site. At the same time, ATI derived revenues from the site and its ties to Digital’s Altavista. It displayed banner ads and solicited other advertisers, who could get information about how they, too, could reach millions of users everyday by advertising on ATI’s Web-site. Digital expressly eschewed providing advertising space to others for its Web-site at that time.
Digital claims that ATI’s Web-site is now a service that provides both a search engine, and advertising space. ATI thus breaches the license agreement by attaching the word “AltaVista” to both of these services. Digital further contends that ATI’s Web-site infringes Digital’s trademark rights in AltaVista, and that the ATI site constitutes unfair competition both under the Lanham Act 43(a) and at common law. ATI argues its usage of AltaVista is permitted by its license with Digital. It also contends this Court lacks personal jurisdiction over it.
III. Personal Jurisdiction
A. Burden Of Proof
ATI has moved under Fed.R.Civ.P. 12(b)(2) to dismiss for lack of personal jurisdiction over it. Digital, as the plaintiff, bears the burden of demonstrating both that ATI’s conduct satisfies Massachusetts’s (the forum state’s) Long-Arm statute, and that the exercise of jurisdiction pursuant to this statute “comports with the strictures of the Constitution.” Foster-Miller, Inc. v. Babcock and Wilcox Canada, 46 F.3d 138, 144-45 (1st Cir. 1995) (quoting Pritzker v. Yari, 42 F.3d 53, 60 (1st Cir. 1994); other citations omitted). (13) Though ATI acknowledges that it has a contract with Digital, a Massachusetts corporation, which contract gives rise to this litigation, it contends that in toto it has insufficient “minimum contacts” with Massachusetts to allow this Court to assert jurisdiction over it. I disagree. Digital has met its burden.
B. Personal Jurisdiction And The Internet
Regardless of whether this is a diversity case based on breach of contract, or a case involving a federal question such as trademark infringement, (14) I find the assertion of jurisdiction over ATI by this Court to be entirely appropriate. I so conclude under the traditional approaches dictated by the Supreme Court and First Circuit precedents, approaches which have been characterized as “territorially based.” (15) I have evaluated the totality of ATI’s minimum contacts with Massachusetts — a contract with a Massachusetts corporation, reflecting an agreement to apply Massachusetts law, soliciting business through its Web-site, including Massachusetts business, and three sales to Massachusetts residents, etc.
At the same time, I cannot ignore the fact that the medium through which many of the significant Massachusetts contacts occurred is anything but traditional; it is a site in cyberspace, a Web-site. It has been said that the Courts have had to re-evaluate traditional concepts of personal jurisdiction in the light of the increasing globalization of the economy. See CompuServe v. Patterson, 89 F.3d 1257, 1262 (6th Cir. 1996). The commercial use of the Internet tests the limits of these traditional, territorial-based concepts even further.
The Internet has no territorial boundaries. To paraphrase Gertrude Stein, as far as the Internet is concerned, not only is there perhaps “no there there,” the “there” is everywhere where there is Internet access. When business is transacted over a computer network via a Web-site accessed by a computer in Massachusetts, it takes place as much in Massachusetts, literally or figuratively, as it does anywhere. As one commentator noted: The Internet breaks down barriers between physical jurisdictions. When a buyer and seller consummate a commercial transaction through a World Wide Web site, there is no need for the traditional physical acts that often determine which jurisdiction’s law will apply and whether the buyer or seller will be subject to personal jurisdiction in the courts where the other is located.
Bradley A. Slutsky, Jurisdiction over Commerce on the Internet, available at http://www.kslaw.com/menu/jurisdic/html, (page 2). (16) On the Internet, “messages can be transmitted from any physical location to any other location . . . without any physical cues or barriers that might otherwise keep certain geographically remote places and people separate from one another.” Law and Borders, 48 Stan. L. Rev. at 1370-71.
The change is significant. Physical boundaries typically have framed legal boundaries, in effect creating signposts that warn that we will be required after crossing to abide by different rules. Id. To impose traditional territorial concepts on the commercial uses of the Internet has dramatic implications, opening the Web user up to inconsistent regulations throughout fifty states, indeed, throughout the globe. It also raises the possibility of dramatically chilling what may well be “the most participatory marketplace of mass speech that this country — and indeed the world — has yet seen.” ACLU v. Reno, 929 F. Supp. 824, 881 (E.D. Pa. 1996). As a result courts have been, and should be, cautious in applying traditional concepts.
Given the very new and unique nature of the technology, this Court will take heed of a Supreme Court plurality’s recent recognition “of the changes taking place in the law, the technology, and the industrial structure, related to telecommunications, [that] we believe [make] it unwise and unnecessary definitively to pick one analogy or one specific set of words now.” Denver Area Education Telecommunications Consortium, Inc. v. FCC, 135 L. Ed. 2d 888, 116 S. Ct. 2374, 2385 (1996) (Breyer, J., plurality opinion) (citation omitted); see also Cass R. Sunstein, Forward: Leaving Things Undecided, 110 Harv. L. Rev. 6, 30-33 (1996) (approving of Justice Breyer’s refusal to lay down a broad rule in Denver Area Consortium as an example of a reasonable, “minimalist” judicial approach to contentious questions regarding rapidly changing technologies).
While this case raises some of these concerns, they are not, in the final analysis, dispositive. There is no issue of inconsistent regulations suddenly imposed on Web users without notice. There is no issue of parties being haled into the courts of a given jurisdiction solely by virtue of a Web-site, without meaningful notice that such an outcome was likely. Nor is there a great risk of chilling the Internet’s “participatory marketplace” by affirming jurisdiction here.
The parties at bar are corporations who have attempted to tame the “Wild West” of the Internet through their private ordering. They have entered into a contract governing their commercial activities on the Internet. Digital sought (and indeed bought) all rights to a trademark identifying its search engine, with certain express exceptions; ATI agreed to enter into a licensing agreement. They both agreed that Massachusetts law would apply to its provisions. While ATI may have tried to structure its relationship with Digital so that it would not be susceptible to jurisdiction in Massachusetts, its subsequent Web activities bring ATI “over the line,” and render jurisdiction appropriate.
This case does not reach the issue of whether any Web activity, by anyone, absent commercial use, absent advertising and solicitation of both advertising and sales, absent a contract and sales and other contacts with the forum state, and absent the potentially foreseeable harm of trademark infringement, would be sufficient to permit the assertion of jurisdiction over a foreign defendant. While it raises some troubling issues, and while the traditional analyses must be informed by this new technology, ultimately, this is not the day nor the forum to resolve them.
C. Methods Of Determining Personal Jurisdiction
The First Circuit has outlined three approaches to a motion to dismiss for want of personal jurisdiction. Foster-Miller, 46 F.3d at 145. The prima facie facie standard, obliges the plaintiff “to adduce evidence of specific facts,” beyond the pleadings which the court accepts “as true for the purpose of determining the adequacy of the prima facie jurisdictional showing.” Id. The approach is particularly appropriate when the facts which would support personal jurisdiction are not disputed. See id.; Boit v. Gar-Tec Products Inc., 967 F.2d 671, 676 (1st Cir. 1992).
At the other extreme lies the “preponderance-of-the-evidence standard,” which “necessitates a full-blown evidentiary hearing at which the court will adjudicate the jurisdictional issue definitively before the case reaches trial.” Foster-Miller, 46 F.3d at 145-46. The problem with this approach is that it “contemplates a binding adjudication . . . [with] preclusive effect . . . [which] can all too easily verge on a deprivation of the right to trial by jury.” Id. at 146.
The First Circuit has offered this Court a “middle course” which I will follow: To engage “in some differential factfinding, limited to probable outcomes as opposed to definitive findings of fact. . .” in order to determine whether “the plaintiff has shown a likelihood of the existence of each fact necessary to support personal jurisdiction.” Id. at 146 (quoting Boit, 967 F.2d at 677). Since the preliminary injunction motion presently before me also requires findings of fact based on a comparable standard, and since some facts supporting jurisdiction may be “bound up with the claim on the merits,” id., the intermediate test seems a particularly appropriate course. See Boit, 967 F.2d at 677-78; Foster-Miller, 46 F.3d at 146.
I find the following jurisdictional facts necessary and sufficient to support personal jurisdiction over ATI are likely to exist: (17) ATI entered into a contract with Digital that includes a clause requiring this contract to be interpreted “under and in accordance” with the laws of Massachusetts; this contract (the “AltaVista” license) and ATI’s alleged breach of it gives rise to the present litigation; ATI operates a Web-site accessible to Massachusetts computer-users; it solicits advertising and its own products through the site; it made at least three sales to Massachusetts residents of software products in the course of and related to its operation of a Web-site; finally, Digital alleges ATI’s Web-site has infringed its trademark and caused considerable confusion in Massachusetts
D. The Massachusetts Long-Arm Statute
The Massachusetts Long-Arm statute, M.G.L. ch. 223A 3 (“Section 3″), provides several bases for asserting jurisdiction. Section 3 reads in pertinent part: A court may exercise personal jurisdiction over a person, who acts directly or by an agent, as to a cause of action in law or equity arising from the person’s (a) transacting any business in this commonwealth;. . . (c) causing tortious injury by an act or omission in this commonwealth; (d) causing tortious injury in this commonwealth by an act or omission outside this commonwealth if he regularly does or solicits business, or engages in any other persistent course of conduct, or derives substantial revenue from goods used or consumed or services rendered, in this commonwealth. . . .
M.G.L. ch. 223A 3(a, c-d). Any one of these grounds would be sufficient. The facts which I have found could be construed to confer personal jurisdiction over ATI based on all three: (1) ATI’s transacting business in the Commonwealth of Massachusetts; (2) ATI’s Web-site allegedly causing tortious injury by acts or omissions in this Commonwealth; or (3) ATI allegedly causing tortious injury in this Commonwealth based on the act of maintaining a Web-site outside Massachusetts, while engaging in what I consider to be a persistent course of conduct here.
1. ATI’s Transaction Of Business In Massachusetts
Section 3(a) requires that the defendant must have transacted business in Massachusetts and that the plaintiff’s claim must have arisen from the transaction of such business. Tatro v. Manor Care, Inc., 416 Mass. 763, 767, 625 N.E.2d 549 (1994). At the outset, the Massachusetts Supreme Judicial Court, however, reminds us that Section 3(a) “has been construed broadly.” Id. (citation and internal quotation marks omitted). That court held that “although an isolated (and minor) transaction with a Massachusetts resident may be insufficient [to satisfy Section 3(a)], generally the purposeful and successful solicitation of business from residents of the Commonwealth, by a defendant or its agent, will suffice to satisfy this requirement.” Id. (citations omitted). The “purposeful and successful solicitation of business” from Massachusetts residents may be manifested by a contract with such a resident. Where, as here, such a contract is “associated with other forum-related activities,” the transacting business requirement of section 3(a) is met. Id. at 768 (citations omitted).
The license-agreement to use the trademark “AltaVista” is a contract entered into by ATI with Digital, a Massachusetts corporation. Without more, it may not be sufficient to comprise transacting business under section 3(a). The “more” is the following:
First, the contract at issue is an integral part of ATI’s transaction of business in Massachusetts. ATI initially sold Digital all of its rights in “AltaVista”; it then contracted to “license-back” the use of “AltaVista” in its url. Any use of this Web-site in Massachusetts “arises from” the contract ATI executed with Digital. Second, ATI’s contract with Digital, which governed the use of the Web-site with the address “www.altavista.com,” was the vehicle through which it solicited business from Massachusetts residents. Its Web-site solicited both sales of software and advertising. Finally, ATI admits that its solicitations were in fact successful; it has made at least three sales to Massachusetts residents. (18)
ATI claims that its contacts with Digital in Massachusetts are relatively minor. Digital apparently solicited the contract from ATI; the negotiations were conducted by phone or in California; the contract itself was not signed by ATI in Massachusetts; neither the defendant nor its physical agents have traveled to Massachusetts, nor does ATI maintain any presence here apart from its Web-site.
Nevertheless, those contacts, especially when viewed in the context of ATI’s conduct after the contract with Digital was executed — the increasing similarities between the appearance of Altavista’s Web site and Digital’s, ATI’s apparent belief that the licensing agreement gave it free rein to capitalize on Digital’s Altavista’s popularity in Massachusetts and elsewhere, the sales to Massachusetts residents — make it clear that its “contract with the plaintiff was one part of a broader range of activities that, literally, amounted to the transaction of business in Massachusetts.” Tatro, 416 Mass. at 769.
ATI also minimizes its contacts by claiming that all it was doing was selling general advertising space on its Web-site, which only incidentally reached Massachusetts residents. (19) While general advertising may not suffice to confer jurisdiction, in this case, ATI’s selling of advertising space (and advertising its own products) on a Web-site is related to the very contract it signed with a Massachusetts company, and integral to the cause of action. (20) Here ATI’s advertising (of its own products and services) on its Web-site in part creates the cause of action. Moreover, when juxtaposed next to its other contacts with this state, it suffices under 3(a).
In short, Digital’s suit “arises from” an alleged breach of a contract with a Massachusetts corporation, and ATI’s resulting Internet activities, including sales and advertising to Massachusetts residents taken together constitute transacting business here. The requirements of Section 3(a) have thus been satisfied.
2. ATI’s Alleged Tort Caused By Acts In Massachusetts
Misrepresentations made “in” Massachusetts can be an alternative basis for jurisdiction under Section 3(c). See, e.g., Ealing Corp. v. Harrods LTD., 790 F.2d 978, 982 (1st Cir. 1986) (holding that a misrepresentation in a telex sent to Massachusetts would provide the basis for Section 3(c) jurisdiction, citing First Circuit and Massachusetts cases). More recently, the Massachusetts Appeals Court held that intentional misrepresentations made by an attorney by phone and mail were sufficient to provide jurisdiction under Section 3(c). See Rye v. Atlas Hotels, Inc., 30 Mass. App. Ct. 904, 906, 566 N.E.2d 617 (1991) (quoting Murphy v. Erwin-Wasey, Inc., 460 F.2d 661, 663-64 (1st Cir. 1972)). See also Burtner v. Burnham, 13 Mass. App. Ct. 158, 163, 430 N.E.2d 1233 (1982) (“where a defendant knowingly sends into a state a false statement, intending that it should be relied upon to the injury of a resident of that state, he has, for jurisdictional purposes, acted within that state.”) (21)
Using the Internet under the circumstances of this case is as much knowingly “sending” into Massachusetts the allegedly infringing and therefore tortious uses of Digital’s trademark as is a telex, mail, or telephonic transmission; (22) the only difference is that the transmission is not “singularly” directed at Massachusetts, in the way that a letter addressed to this state, or a telephone or fax number with a Massachusetts area code would be. But ATI “knows” that its Web-site reaches residents of Massachusetts who choose to access it, just as surely as it “knows” any letter or telephone call is likely to reach its destination. And it presumably “knows” the contents of its Web-site. ATI is a corporation whose primary business is providing Internet software; it is charged with the knowledge that its Web-site is accessible through the Internet in Massachusetts. It not only took no steps to prevent the alleged infringements from reaching this state’s residents — assuming there were steps to take – it plainly intended to market its wares here.
Again, this lawsuit “arises from” ATI’s allegedly tortious acts or omissions, and Section 3(c)’s requirements are thus satisfied.
3. Alleged Tort Caused By Acts Outside Massachusetts
Section 3(d) requires a tort committed in Massachusetts based on acts committed elsewhere, coupled with either regular solicitation of business, or continuing contacts, or the derivation of substantial revenue from Massachusetts. (23)
As noted above, Digital alleges that a tort — trademark infringement — was committed in Massachusetts. The question under Section 3(d) is whether ATI’s activities also amount to regularly “soliciting business” in this Commonwealth or constitutes “engaging in any other persistent course of conduct” within the meaning of the Section.
ATI’s Web-site, generally accessible twenty-four hours a day and seven days a week to all Massachusetts residents who can access the Web, plainly solicits business in Massachusetts. It also constitutes continuing contacts with this state insofar as ATI sells advertising space and software through the Web site to citizens of Massachusetts. When software is sold (or even given away so that users will visit the site) through the Web-site, the software can be transmitted via the Internet directly to a computer located in Massachusetts; as such, it plainly comprises doing business here. At least three such sales have taken place. ATI further “solicits” business by offering advertising space to Massachusetts citizens for a fee.
Maintaining a Web-site that can be accessed by Massachusetts citizens, coupled with the other contacts described above, is engaging in a persistent course of conduct sufficient to satisfy the requirements of Section 3(d). See Keds Corp. v. Renee Int’l Trading Corp., 888 F.2d 215, 218-19 (1st Cir. 1989); (24) Landmark Bank v. Machera, 736 F. Supp. 375, 384 (D. Mass. 1990). Digital’s cause of action arises from ATI’s continuing course of conduct on a Web-site that allegedly causes torts inside Massachusetts.
E. Constitutional Due Process Concerns
